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(B)(N) WU Western Union Company

May 13, 2013

Drama. The Western Union Company is the global non-bank bank for the un-banked, and it is fairly estimated as handling about 18% of the global $420 billion of cash-to-cash remittances in 2009, of which 75% ($317 billion) went to “developing countries” (Global Finance, October 2012, Banks Make A Bid For A Growing Market, citing research from the SIBOS Conference, Dubai 2013, and the Society for Worldwide Interbank Financial Telecommunication (SWIFT)).

Naturally, the bank banks and the investment community are “interested” in that business (Reuters, May 12, 2013, Western Union shares could rise in coming years – Barron’s) but we see it less as a burgeoning center for unearned profits and more as an expensive essential service to the un-banked, many of whom live at home, that is, here, and live and work in the “gray” or “cash economy” that has been reliably estimated to be worth $2 trillion a year in the U.S. alone and troubles the IRS (The New Yorker, April 29, 2013, The Underground Economy).

The Western Union Company has been in business continuously since 1851, but ended its telegraph business in 2006 under a new incorporation and a new, now familiar, business model for cash-to-cash transfers that has 515,000 agents world-wide in over 200 countries, and no competitors of comparable size, although “electronic wallets” of all sizes are rapidly becoming available to anyone with a computer or a telephone, in a business-model which the Western Union Company pioneered.

The stock price was $18 in 2006 and is $16 today (please see Exhibit 1 below) and the company has to deal with the special problems of AML (anti-money laundering) and “electronic money” that are lessened in the bank banks under the KYC (Know Your Client) rule. Please see, File No. 0123145, United States of America Before The Federal Trade Commission and the State of Arizona v. Western Union Financial Services Incorporated, an inquiry which had a deliriously negative effect of $5 to $6 per share and $2.5 billion on the stock price and market value at that time (please see Exhibit 1 below).

The Risk Price (SF) is currently $18 and is itself a KYC (Know Your Company) type of rule that suggests that we not invest in the company at the present time, despite a hard-earned dividend of $0.125 per share per quarter for a payout of $280 million per year to its shareholders and a current yield of 3%. We’ll just have to wait until more of the Barron’s could becomes is.

Exhibit 1: (B)(N) WU Western Union – Risk Price Chart

(B)(N) WU Western Union Company

(B)(N) WU Western Union Company

Western Union Company is engaged in global money transfer and payment services, providing people with fast, reliable and convenient ways to send money around the world.

(Please Click on the Chart to make it larger.)

From the Company: The Western Union Company provides money movement and payment services worldwide. The company operates in three segments: Consumer-to-Consumer, Consumer-to-Business, and Business Solutions. The Consumer-to-Consumer segment offers cash money transfer services involving walk-in agent locations. This segment provides various options for sending and receiving funds, including walk-in and telephone money transfer, online money transfer, account based money transfer, direct to bank, and mobile money transfer services through a network of third-party agents using multi-currency and real-time money transfer processing systems. The Consumer-to-Business segment provides options to make one-time or recurring payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies, and other businesses. It also offers various products, which give consumers choices as to the payment channel and method of payment, including Western Union Payments, Speedpay, Equity Accelerator, and Pago Fácil. This segment offers its services primarily through the phone and the Internet, as well as through its agent networks and select company-owned locations. The Business Solutions segment facilitates payment and foreign exchange solutions, primarily cross-border and cross-currency transactions for small and medium size enterprises and other organizations, as well as for individuals. This segment offers its services through the phone, partner channels, and via the Internet. As of December 31, 2012, the company had a network of 515,000 agent locations. The Western Union Company was incorporated in 2006 and is headquartered in Englewood, Colorado.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks.

Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.


We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to


Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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